March 31, 2011

DOJ Avoids Taking Position in Greenberg Traurig Restitution Dispute

The Justice Department will not get between Greenberg Traurig and a former Jack Abramoff business partner as the two sides fight over tens of millions of dollars in restitution rooted in a fraud scheme.

Lawyers for Greenberg Traurig want Michael Scanlon, who worked closely with Abramoff, to pay the firm nearly $17.7 million to cover the firm's losses for compensating victims of a kickback scheme that targeted a group of Native-American tribes. Abramoff and Scanlon orchestrated the fraud.

The firm, represented by Williams & Connolly, said it settled actual or threatened litigation with the tribes. Scanlon’s lawyers maintain Greenberg Traurig knew about fees Scanlon was paying to Abramoff, a lobbyist for the firm. Greenberg Traurig is not an innocent third party and should therefore be denied restitution, said a lawyer for Scanlon, Ropes & Gray partner Stephen Braga.

DOJ prosecutors Mary Butler, a Public Integrity Section senior trial attorney, and Nathaniel Edmonds, an assistant chief in the Fraud Section, said in court papers filed this afternoon in Washington's federal trial court that the dispute raises novel legal questions.

The government is not eager to step between Scanlon and Greenberg Traurig, taking one side over the other. Indeed, that won’t happen. The Justice Department said it’s already done its part—securing a restitution order as part of Scanlon’s sentencing last month.

“This collateral proceeding, however, may require the government to go beyond its usual role and advocate about the involvement of GT in the underlying criminal conduct in a manner that is extremely atypical,” prosecutors said in court papers filed Thursday afternoon. “Because the government did not seek criminal charges against or designate GT as an unindicted co-conspirator, the government submits that it should not now be required to take a position regarding GT’s involvement in the offenses and whether the facts would rise to the level of GT’s criminal culpability, and, thus, impact GT’s ability to collect funds from Scanlon.”

Prosecutors said there is no clear authority for ordering a defendant to pay the full amount of restitution after all victims have already been paid. The DOJ's filing is here (PDF).

Greenberg Traurig’s lawyers said in recent court papers that Scanlon should not be allowed to keep profits from a criminal scheme. DOJ lawyers said the issue of whether a defendant in Scanlon’s position would keep that money has not been litigated any circuit court.

If Greenberg Traurig is not entitled to compensation, Scanlon’s restitution would be capped at $2.5 million, payment for two tribes’ uncompensated losses.

Chief Judge Royce Lamberth of the U.S. District Court for the District of Columbia is presiding over the restitution flap. Lamberth has not decided whether to hold a hearing.